Public expenditures on health care for the elderly are rising at a relentless rate. This subproject will study the role of the disabled elderly in this expenditure growth, recognizing that the fate of this group has a disproportionate impact on Medicare and Medicaid expenses due to their greater tendency to require hospitalization and intensive medical treatments than their non-disabled counterparts. Learning about the evolution of disabilities in the elderly population in conjunction with how particular disabilities interplay with chronic illnesses and medical needs constitutes a vital source of knowledge required to project future health-care expenditures by this high cost group. To develop this knowledge, this subproject will focus on the following specific aims: (1) synthesize our understanding of trends in disability, (2) establish the intertemporal links between disabilities and chronic illnesses, (3) examine evolution of mortality rates for disabilities and chronic diseases, (4) develop lifetime profiles relating Medicare/Medicaid expenditures and disabilities, and (5) provide a capacity for evaluating implications of policy reforms. To conduct this comprehensive study, this subproject will exploit a wide variety of survey data sources on the elderly, in combination with sophisticated longitudinal files constructed from Medicare and Medicaid enrollment and claims data detailing costs and use of medical services. Our empirical work will rely on two basic empirical frameworks capable of summarizing how events and expenditures evolve over time and across ages: "cohort" profiles characterizing how outcomes or expenditure distributions change over time and across ages for specific groups; and the estimation of dynamic quantiles for individuals in a longitudinal setting revealing the degree of the persistence in health conditions and expenditures over a lifetime.